Estate planning is a complicated process fraught with uncertainty introduced by the unpredictability of personal health and safety, financial markets and the law over time. The complexity is made more severe for larger estates that typically hold a wide variety of assets, utilize more sophisticated tax advantaged or exempt structures, have liabilities to many different parties, and involve a large number of beneficiaries. Especially in the case of these larger or more complex estates, the final disposition of an estate is highly vulnerable to changes in the taxation of estate assets, gifts and income.
Different types of assets experience different tax treatment when transfers are made upon a person's death. Further, the application of taxes to estates has been, and likely will remain, in flux. For example, the federal estate tax exemption levels are mandated to rise to $3.5 million by 2009 and to fall to just $1 million in 2011. In 2010, the federal estate tax is completely repealed. Other taxes, such as the gift tax, the Generation-Skipping Transfer Tax (GSTT) and income tax may also be paid out of the estate upon disposition of its assets to beneficiaries. As Congress and state governments adjust the tax codes to evolving public sentiment and changing fiscal needs, these exogenous legal and policy factors further complicate the inherent endogenous uncertainties in predicting or projecting the impact of a death or deaths on the financial well-being of heirs and other beneficiaries.
In view of these taxes, estate planners have utilized a multitude of legal structures such as trusts to reduce or minimize estate, death or income taxes. More complicated or expansive estates typically require more individualized attention from wealth advisors and estate planners to accomplish the client's estate planning objectives. As the estate plans become more complex, planners and clients alike have struggled to clearly understand the structure and eventual implications of their estate planning documents on their assets and heirs/beneficiaries. Conventional estate document generation software such as Quicken WillMaker assists users in generating documents such as wills and trusts. These document generation software solutions, however, do not provide a client with a comprehensive view of the eventual financial impact of the documents being generated. Previously, wealth advisors had to draw flowcharts by hand or expend significant effort to use generic flowcharting software such as Microsoft PowerPoint or Visio.
The prior art solutions have several drawbacks which limit their use to estate planners, wealth advisors, and their clients. For example, conventional solutions include Estate Planning QuickView by Leimberg Associates, generates rudimentary charts and graphs based on a client's assets and general provisions in the client's will or trust documents. QuickView and similar programs, however, lack the flexibility and extensibility required to adequately plan and manage the disposition of complex estates. In particular, these prior art solutions fail to combine and reconcile the complex tax analysis required for these estates and the need for a clear visual depiction of the estate at ultimate disposition and intermediate points of time therein. These programs also do not estimate potential liquidity deficits upon final disposition of an estate, which deficits can create enormous tax liabilities for beneficiaries the deceased intended to care for.
Accordingly, in view of the deficiencies in the prior art, several industry needs have been recognized by the inventors. First, there is a need for improved and customizable graphical visualization tools to communicate the intricate flow of assets and liabilities to different entities over time, where this tool receives a variety of inputs related to the estate's assets, liabilities and estate planning instructions. Second, there is a need to project or estimate tax implications related to the estate's assets and estate plan, including identification of a potential for the estate to experience a liquidity deficit or shortfall. Third, there is a need to clearly reconcile and combine the tax implications of a complex estate plan with a clear visual depiction of the estate's disposition at a future time.